How to Account for Law Firm Fixed Assets and Depreciation in 2026: The 7-Step Workflow for Technology Capex, Office Build-Outs, and Leased Equipment

🧾 Why Law Firms Get Fixed Assets Wrong

Law firm accounting attention follows risk. Trust accounting gets attention because a mistake can end a career. Billing gets attention because it is revenue. Fixed assets get almost none, because nobody has ever been disbarred over a depreciation schedule.

The consequence is predictable. A firm buys $84,000 of laptops, monitors, and conference room AV in March. Someone books the whole thing to "Office Expense." March looks like a catastrophic month. Every month after looks artificially good. Partner distributions get calculated on numbers that were never right. And when the firm evaluates whether its 2026 AI and infrastructure spending is producing a return, there is no asset base to measure the return against.

1️⃣ Set a Written Capitalization Policy

Before you can account for anything consistently, you need a rule that removes judgment from the monthly decision. A workable law firm policy has three parts:

• Dollar threshold. Most mid-market firms land between $1,000 and $5,000 per item. Below the threshold, expense it. Above it, capitalize it.
• Useful life table. Assign standard lives by category so nobody re-litigates it: computers and servers (3 years), office furniture (7 years), leasehold improvements (shorter of lease term or useful life), phone and AV systems (5 years), law library and non-subscription reference materials (varies).
• Aggregation rule. A single $1,100 laptop is one thing; forty laptops purchased together as a refresh project is another. Decide in advance whether you capitalize by unit or by project.

2️⃣ Build and Maintain a Fixed Asset Register

The register is the subledger. Every capitalized item needs a row with: asset ID, description, acquisition date, vendor, cost, useful life, depreciation method, accumulated depreciation to date, net book value, assigned location or office, and assigned practice group or cost center.

Two fields matter more than firms expect. Location lets multi-office firms allocate depreciation to the entity that actually holds the asset — essential when your P&L consolidates several LLCs or PCs. Cost center lets you push technology depreciation into practice group overhead so matter profitability reflects real cost, not just salaries and hard costs.

3️⃣ Capitalize Correctly at the Moment of Purchase

The entry at acquisition is simple, and getting it right at the point of entry is far cheaper than fixing it in December:

Capitalized cost includes what it took to get the asset in service: purchase price, sales tax, freight, and installation or configuration labor. It does not include training, extended service contracts, or software subscriptions billed monthly — those are operating expenses.

4️⃣ Book Depreciation Every Month, Not Every Year

Straight-line depreciation is appropriate for nearly all law firm assets and requires one recurring journal entry per month:

Monthly matters because law firm decisions are monthly. Partner draws, practice group performance reviews, and rate discussions all happen against interim financials. If depreciation only appears in a year-end adjusting entry, every interim P&L your partners have reviewed all year overstated profit.

5️⃣ Allocate Depreciation Where the Asset Is Used

This is the step that separates bookkeeping from management accounting. A firm with three offices and four practice groups should not carry all depreciation in a single firm-wide overhead bucket. Allocate it — by office for entity-level reporting, and by cost center for practice group profitability.

Once depreciation is allocated, matter profitability becomes honest. A litigation group that consumes heavy document infrastructure and a transactional group that consumes almost none stop looking equally efficient on paper.

6️⃣ Reconcile the Register to the General Ledger Monthly

Two numbers must agree at every close:

• Total cost on the fixed asset register = balance in the Fixed Assets GL accounts
• Total accumulated depreciation on the register = balance in the Accumulated Depreciation GL accounts

If they diverge, the cause is almost always one of four things: an asset was capitalized in the GL but never added to the register, an asset was expensed instead of capitalized, a manual journal entry hit the accumulated depreciation account outside the normal process, or a disposal was recorded in one place and not the other. Catching that in a month is a five-minute fix. Catching it in December is a forensic exercise.

7️⃣ Record Disposals, Trade-Ins, and Write-Offs Properly

When a laptop is retired, a lease ends, or an office build-out is abandoned, three things happen at once: the asset comes off the books at cost, the related accumulated depreciation comes off, and any difference between net book value and proceeds becomes a gain or loss.

Firms that refresh hardware on a three-year cycle should build disposal into the refresh project itself. The purchase order and the disposal entry should be created in the same week — otherwise the register grows permanently and the reconciliation in step six starts failing every month.

🗓️ Where This Fits in Month-End Close

Fixed assets belong in the middle of the close, after AP is cut off and before financial statements are produced. A practical sequence:

• Day 2: Review the month's AP and expense coding for anything above the capitalization threshold that was miscoded
• Day 3: Add new assets to the register with location and cost center assigned
• Day 3: Post the recurring depreciation entry and any disposals
• Day 4: Reconcile register totals to the GL; investigate any variance before it ages
• Day 5: Produce the P&L and balance sheet with depreciation already allocated